A pay rise for seafarers would promote sectoral growth

Over the past two years the vast majority of the world’s 1.6m seafarers have endured a drop in the purchasing power of their already meagre minimum wages. That is the result of the failure to reach an agreement to increase seafarers’ minimum wage in Geneva in 2016.
The background document for the forthcoming ILO negotiations prepared by the Office of the International Labour Organisationlays this out in stark terms. The current global minimum of $614 per month, set four years ago, has fallen woefully behind. Seafarers in 47 countries have seen the purchasing power of their wages fall – in the case of 19 countries the drop has been by more than 10%, in some countries it has been by as much as 15%.
For four fifths of those currently serving at sea, inflation and exchange rate variations mean that the value of the minimum wage in their home countries has fallen. Tens of thousands of seafarers remit pay to their families every month. The falling value of their remittances home means that as well as enduring the dangers and privations of life at sea, when they have been able to speak with loved ones, it has been to lean of an increasing struggle to make ends meet.
In only eight countries has the value of seafarers’ wages not fallen – and the vast majority of those have seen purchasing power no better than standstill.
At the last wage negotiations of the ILO Joint Maritime Commission the shipowners painted a lurid picture of the state of the world economy and the consequent challenges facing the shipping industry. It is instructive to check against their indices and see just how wrong they were.
Earlier this year the IMF lifted its global growth forecast for 2018 and 2019 from 3.7% to 3.9%. It called this the ‘broadest synchronised growth since 2009?’
The IMF’s optimism is echoed by most mainstream economists.
Here is PWC’s assessment for the world economy in 2018. “Global economic growth on track to be the fastest since 2011: In our main scenario, we project the global economy will grow by almost 4% in purchasing power parity (PPP) terms, its fastest since 2011, adding an extra $5 trillion to global output in current value terms. More importantly, we expect growth to be broad based and synchronised, rather than dependent on a few countries. The main engines of the global economy – the US, emerging Asia and the Eurozone, which comprised 60% of world GDP in 2017 – are expected to contribute almost 70% of economic growth in 2017 in PPP terms compared to their post-2000 average of around 60%.”
Unsurprisingly strong GDP growth has its roots in a healthy global trade position. According to the World Trade Organisation, trade growth in 2017 was ‘very strong’ – merchandise trade grew by 4.7%. In the same year, developed economies’ exports and imports grew 3.5% and 3.1%, respectively, while developing countries recorded export growth of 5.7% and import growth of 7.2%.
The director general of the WTO, Roberto Azevêdo told a press conference in April how he saw the next couple of years: “World merchandise trade volumes will grow nearly as fast in 2018 as they did in 2017, with growth of 4.4%. And we expect that growth will remain quite strong in 2019 at around 4.0%. It represents the best run of trade expansion since before the crisis, supporting economic growth, development and job creation around the world.”
That goes some way to explaining the fundamentally upward trajectory of indices such at the Baltic Dry Index over the past couple of years.
A strong economy brings its own challenges, of course, not least tightening labour markets. Unemployment in developed countries is expected to hit a 40-year low during 2018. And recruitment is not the only challenge the maritime industry faces. The ongoing consolidation of shipping lines is evidence of that. Quite apart from the promising economic backdrop there are other changes afoot that offer the possibility of dramatically reduced costs for the sector.
At industry events today, much of the talk is of the benefits of making trade digital – or paperless, to be more precise. The benefits from doing so will be staggering. According to a UN report, putting all the Asia-Pacific region’s trade- related paperwork online could slash the time it takes to export goods by up to 44%, cut the cost of doing so by up to 31%, and boost exports by as much as $257bn a year.
That prospect holds the potential for an invigorating future for the sector – but one in which there will potentially be losers as well as winners. There are no shortage of wolves at the door – giants such as Amazon are already looking enviously at the global logistics industry as a potential future avenue for growth.
But there will only be losers if players in the existing sector don’t act – to modernise, to adapt and build the workforce needed to enjoy the huge potential offered by a buoyant economy.
At the heart of any strategy to achieve this there must be a clear vision of the importance of high quality, well-motivated, loyal staff. Building effective teams has many dimensions. MSC, for example, has massively improved staff retention in recent years by creating a training culture within its ranks.
The foundation of mutually beneficial employment, however, is decent pay. That is why we are calling for a real terms rise in the seafarers’ global minimum wage of no less than $50 a month.
Agreeing such a rise would be a signal from shipowners to their crews. It will acknowledge that the global trading position does indeed look favourable for shipping, that there is a significant prize to be won in the coming years. This is a challenge to which all those who depend on shipping for their livelihoods can apply themselves so long as the ship owners act now to demonstrate that we all have a stake in the spoils.

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